roblem 3-12 On January 1, 2019, an entity granted to a senior executive 20,000 share options, conditional upon the executive’s remaining in the entity’s employ until December 31, 2021. The par value per share is P50. The exercise price is P100. However, the exercise drops to P80 if the entity’s earnings increase by at least an average of 10% per year over the three-year period. On grant date, the entity estimates that the fair value of the share option is P30 if the exercise price is P80. If the exercise price is P100, the fair value of the share option is P25. During 2019 and 2020, the earnings increased by 12% and 11% respectively. However, during 2021, the earnings increased only by 4%. Required: A. Prepare journal entries from 2019 to 2021

roblem 3-12 On January 1, 2019, an entity granted to a senior executive 20,000 share options, conditional upon the executive’s remaining in the entity’s employ until December 31, 2021. The par value per share is P50. The exercise price is P100. However, the exercise drops to P80 if the entity’s earnings increase by at least an average of 10% per year over the three-year period. On grant date, the entity estimates that the fair value of the share option is P30 if the exercise price is P80. If the exercise price is P100, the fair value of the share option is P25. During 2019 and 2020, the earnings increased by 12% and 11% respectively. However, during 2021, the earnings increased only by 4%. Required: A. Prepare journal entries from 2019 to 2021

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 8E

See similar textbooks

Similar questions

On January 1, 2019, Phoenix Corporation adopts a performance-based share option plan for 25 executives, with the number of shares based on the yearly increase in sales. At the end of 2019, based on a 10% increase in sales, it expects that each executive will be granted 150 options and that the fair value of an option expected to vest is 15.75. Phoenix expects a turnover rate of 15% over the 3-year service period. Determine the compensation expense for 2019 for this plan.
PROBLEM 1 An entity grants 100 share options to each of its 500 employees. Each grant is conditional upon the employee working for the entity over the next three years. The entity estimates that the fair value of each share option is P20. On the basis of a weighted average probability, the entity estimates that 30% of employees will leave during the three-year period and therefore forfeit their rights to the share options.During Year 1, 25 employees leave. The entity revises its estimate of total employee departures over the three-year period from 25% to 20%. During Year 2, a further 27 employees leave. The entity revises its estimate of total employee departures over the three-year period from 20% to 15%. During Year 3, a further 20 employees leave. Hence, a total of 72 employees forfeited their rights to the share options during the three-year period. 1. The total shareholders’ equity at the end of Year 1 would have increased (decreased), as a result of the grant, by:…
PROBLEM 3 : At the beginning of Year 1, an entity grants 1,000 share options to 50 employees. The share options will vest at the end of Year 3, provided the employees remain in service until then. The share options have a life of 10 years. The exercise price is 60 and the entity’s share price is also P60 at the end of the grant. The entity’s share price have a par value of P20.At the date of grant, the entity concludes that it cannot estimate reliably the fair value of the share options granted. At the end of Year 1, three employees have ceased employment and the entity estimates that a further seven employees will leave during Years 2 and 3. Hence, the entity estimates that 80% of the share options will vest. Two employees leave during Year 2, and the entity revises its estimate of the number of share options that it expects will vest to 86%. Two employees leave during year 3. Hence, 43,000 share options vested at the end of year 3.The entity’s share price during Years 1 to 10, and…
PROBLEM 3 : At the beginning of Year 1, an entity grants 1,000 share options to 50 employees. The share options will vest at the end of Year 3, provided the employees remain in service until then. The share options have a life of 10 years. The exercise price is 60 and the entity’s share price is also P60 at the end of the grant. The entity’s share price have a par value of P20.At the date of grant, the entity concludes that it cannot estimate reliably the fair value of the share options granted. At the end of Year 1, three employees have ceased employment and the entity estimates that a further seven employees will leave during Years 2 and 3. Hence, the entity estimates that 80% of the share options will vest. Two employees leave during Year 2, and the entity revises its estimate of the number of share options that it expects will vest to 86%. Two employees leave during year 3. Hence, 43,000 share options vested at the end of year 3.The entity’s share price during Years 1 to 10, and…
Problem 24-7 (IFRS) On January 1, 2020, Easy Company granted 30,000 share options to employees. The share options will vest at the end of three years provided the employees remain in service until then. The option price is P60 and the entity's share price is also P60 at the date of grant. The par value of the share is P50. At the date of grant, the entity concluded that the fair value of the share options cannot be estimated reliably. The share options have a life of 6 years. This means that the options can be exercised within three years after vesting. All share options vested at the end of three years and no employees left during the three-year period. The share prices and the number of share options exercised are set out below. Share price Share options exercised at year-end 2020 63 2021 66 2022 75 10,000 15,000 5,000 2023 88 2024 100 2025 90 Required: 1. Determine the compensation expense for each year from 2020 to 2025 using the intrinsic value method. 2. Prepare journal entries…
PROBLEM 5 At the beginning of Year 1, an entity grants 15,000 share options with a ten-year life to each of ten senior executives. The share options will vest and become exercisable immediately if and when the entity’s share price increases from P50 to P70, provided that the executives remains in service until the share price target is achieved.The entity applies a binomial option pricing model, which takes into account the possibility that the target will be achieved during the ten-year life of the options and the possibility that the target will not be achieved. The entity estimates that the fair value of the share options at grant date is P25 per option. From the option pricing model, the entity determines that the mode of the distribution of possible vesting date is five years. In other words, of all the possible outcomes, the most likely outcome of the market condition is that the share price target will be achieved at the end of Year 5. Therefore, the entity estimates that the…
Problem 4: (Share-based compensation: Share options) On January 1, 2020, COLOR Company granted 250 share options to 300 employees, conditional upon the employees remaining in the entity’s employ during the vesting period. The share options will vest over a three-year period. The fair value of each share option is ₱50. By the end 0f 2020, 25 employees have left and based on a weighted average probability, a further 20 employees will leave during the vesting period. By the end of 2021, only 10 employees have left and a further 28 employees will leave during 2022. By the end of 2022, only 30 employees left the entity. All share options are exercised at December 31, 2022. G. Fill in the amounts per individual account based on the exercise of the options on December 31, 2022 14. Debit to Cash?15. Debit to Share options outstanding?
Problem 4: (Share-based compensation: Share options) On January 1, 2020, COLOR Company granted 250 share options to 300 employees, conditional upon the employees remaining in the entity's employ during the vesting period. The share options will vest over a three-year period. The fair value of each share option is P50. By the end of 2020, 25 employees have left and based on a weighted average probability, a further 20 employees will leave during the vesting period. By the end of 2021, only 10 employees have left and a further 28 employees will leave during 2022. By the end of 2022, only 30 employees left the entity. All share options are exercised at December 31, 2022. Requirements: E. Prepare all necessary entries for the year. F. Compute for the compensation expense for: 11. 2020 12. 2021 13. 2022
On January 1, 2020, Panic Company granted to a senior executive 30,000 share options, conditional upon the executive's remaining in the entity's employ until December 31, 2022. The par value per share is P50. The exercise price is P 100. However, the exercise price drops to P80 if the entity's earnings increase by at least an average of 10% per year over the three-year period. On grant date, the entity estimated that the fair value of the share option is P30 if the exercise price is P80. If the exercise price is P 100, the fair value of the share option is P 25. During 2020 and 2021, the earnings increased by 11% and 12% respectively. However, during 2022, the earnings increased only by 4%. What amount should be recognized as compensation expense for 2022? a. 300,000 b. 600,000 c. 150,000 d. 750,000
On January 1, 2020, Baxcon Company granted to a senior executive 33,000 share options, conditional upon the executive's remaining in the entity's employ until December 31, 2022. The par value per share is P50. The exercise price is P100. However, the exercise price drops to P80 if the entity's earnings increase by at least an average of 10% per year over the three-year period. On grant date, the entity estimated that the fair value of the share option is P30 if the exercise price is P80. If the exercise price is P100, the fair value of the share option is P25. During 2020 and 2021, the earnings increased by 11% and 12% respectively. However, during 2022, the earnings increased only by 4%. What amount should be recognized as compensation expense in 2022?
Problem 4: (Share-based compensation: Share options) On January 1, 2020, COLOR Company granted 250 share options to 300 employees, conditional upon the employees remaining in the entity’s employ during the vesting period. The share options will vest over a three-year period. The fair value of each share option is ₱50. By the end 0f 2020, 25 employees have left and based on a weighted average probability, a further 20 employees will leave during the vesting period. By the end of 2021, only 10 employees have left and a further 28 employees will leave during 2022. By the end of 2022, only 30 employees left the entity. All share options are exercised at December 31, 2022. G. Fill in the amounts per individual account based on the exercise of the options on December 31, 2022 16. Credit to Ordinary share capital?17. Credit to Share premium – ordinary shares?
Question: The carrying amount of the investment on December 31, 2020? On January 1, 2019, an entity purchased 15,000 shares of another entity representing a 12% interest for P2,500,000. The entity elected to measure the investment at FVOCI. The investee reported net income of P3,000,000 and paid dividends of P15 per share in 2019. The fair value of the investment was P2.800.000 on December 31, 2019. On January 1, 2020, the entity paid P3,000,000 for 16.250 additional shares of the investee. The fair value of the 12% interest did not change on this date. The fair values of the identifiable net assets of the investee equal carrying amount of P15,000,000 on such date except for land whose fair value exceeded carrying amount by P3,000,000. For the year ended December 31, 2020, the investee reported net income of P6,000,000 and paid dividends of P20 per share.